Budget 2024: Long-Term Capital Gains Tax on Real Estate in India Set for a Revamp
The Indian government is considering a change in the holding period for computing capital gains tax on immovable assets such as real estate to bring about uniformity with equities and equity mutual funds.
LtcgReal EstateCapital Gains TaxBudget 2024IndiaReal EstateJul 16, 2024
Currently, any capital gain from the sale of real estate held for 24 months or less is treated as a short-term capital gain. In contrast, the holding period threshold for listed equities and equity mutual funds is 12 months. The proposal suggests that property held for more than 12 months be considered long-term assets, bringing this in line with equities and equity mutual funds.
However, there may not be any change in the tax rates for both long-term and short-term capital gain. The long-term capital gains tax on property is 20% with indexation benefits to adjust for inflation. Any short-term capital gain is added to the assessee's income and taxed at the appropriate slab rate. Additional cess and surcharge may be levied where applicable.
The Centre may take up a more detailed capital gains tax regime restructuring later after wider discussion and consultations. According to sources, there may not be a major rate rejig at this stage, but it may happen later.
The proposal also includes some concessions for senior citizens over the existing exemptions. It may include raising the threshold for capital gains for ancestral property, or exemptions if sales proceeds are used for medical expenses and geriatric care. Inclusion in the budget will be subject to final approval by the highest decision-makers.
Tax experts expect this move to bring more properties to market, ease price pressure, and foster a more favourable investment environment. 'Reasonable tax rates on capital gains are required to enable people to save and build a retirement corpus that they can rely on in the absence of any credible social security system in the country,' said Kumarmanglam Vijay, partner, JSA Advocates & Solicitors.
Information
JSA Advocates & Solicitors is a leading law firm in India, providing expert legal services in various areas, including taxation, corporate law, and real estate.
The Indian government is committed to creating a more business-friendly and investor-friendly environment, and the proposed change in the LTCG tax regime for real estate is a step in this direction.
Frequently Asked Questions
What is the current holding period for computing capital gains tax on real estate?
The current holding period for computing capital gains tax on real estate is 24 months or less, which is treated as a short-term capital gain.
What is the proposed change in the holding period for real estate?
The proposed change is to consider property held for more than 12 months as long-term assets, aligning it with the existing regime for listed equities and equity mutual funds.
Will there be any change in the tax rates for long-term and short-term capital gain?
There may not be any change in the tax rates for both long-term and short-term capital gain, at least in the short term.
What are the benefits of the proposed change for senior citizens?
The proposal includes some concessions for senior citizens, including raising the threshold for capital gains for ancestral property, or exemptions if sales proceeds are used for medical expenses and geriatric care.
Why is the proposed change in the LTCG tax regime important for the Indian economy?
The proposed change is expected to bring more properties to market, ease price pressure, and foster a more favourable investment environment, which is essential for India's economic growth.
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